How Will the 2024 Autumn Budget Tax Changes Impact Your Business?

The 2024 Autumn Budget has arrived, and as with every announcement, it brings a mix of impacts for employers, employees and consumers. There are some critical changes for businesses, especially those focusing on managing rising costs in an already challenging environment.

Changes to business taxes

The budget has brought important changes to business taxes, impacting both large and small companies. Key updates include:

• National Insurance Contribution (NIC)
  Changes due to come into effect from April 2025. For a business with 30 employees earning an average of £30,000, the National Insurance rate increase will add approximately £25,974 annually to the employer’s NI contributions.
  • Increase in employer NIC rate
    The NIC rate that employers pay in contributions is set to rise to from 13.8% on workers earnings above £175.
  • Reduction in NIC threshold for employers
    The threshold for which employers start paying NIC contributions on employee’s salaries will reduce from £9,100 per year to £5,000.
  • Increase in employment allowance
    The employment allowance, the amount employers can claim back from their national insurance bill, is set to increase from £5,000 to £10,500.
• Corporation tax
  Main rate of corporation tax, paid by businesses on taxable profits over £250,000, to stay at 25% until the next election.
• Reduction in business rates discount
  The current 75% business rates discount, set to expire in April 2025, will be replaced by a 40% discount capped at £110,000. The average shop will see business rates jump from £3,589 to £8,613 next April, while costs for pubs will increase from £3,938 to £9,451.
• Workers’ rights
  Plans to improve workers’ rights are expected to cost businesses up to £5 billion annually, according to the government’s own analysis.  

These changes are likely to increase operational costs for many businesses, especially those with larger payrolls or significant property holdings. While the freeze on corporation tax provides stability for high-earning companies, many businesses will need to adjust their budgets and growth strategies in response to the updated NIC thresholds and reduced business rates discount. The NIC hike, in particular, may lead businesses to reevaluate hiring, wages, and pricing structures as they plan for these financial adjustments.

Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR) increases

New measures will see increased tax rates on CGT and adjustments to BADR rates over the coming years.

• Capital Gains Tax increases
  CGT increased from 30^th October 2024.  
  • Lower taxpayers’ rate will rise from 10% to 18%. 
  • Higher taxpayers’ rate will rise from 20% to 24%. 
• Business Asset Disposal Relief increases 
  BADR rates will remain the same for the rest of the financial year. 
  • From April 2025, the rate will increase from 10% to 14%.
  • From 2026, the rate will increase again, to 18%. 

The rate of CGT has already changed, and the incoming increases to BADR will lower the tax benefits of closing your solvent company via a Members Voluntary Liquidation (MVL).

Depending on your circumstances, by speaking to us now and starting the MVL process, you can benefit from the current, lower rate of BADR you may be entitled to before it increases. Equally, you may be planning to liquidate your company and want more information as to how these changes will affect you. 

Find out more about these changes and the impact on MVLs

National Minimum Wage increases

A key feature of the budget is the increase in the minimum wage, aimed at improving pay for lower-income workers. The changes are as follows:

• Over 21s
  Minimum wage increases from £11.44 to £12.21 per hour. Annual additional cost per employee is £1,701.25, working 37.5 hours a week.
• 18 to 20-year-olds:
  Minimum wage increases from £8.60 to £10 per hour as part of a long-term plan to move towards a ‘single adult rate’. Annual additional cost per employee is £1,701.25, working 37.5 hours a week.
• Apprentices
  Apprentice wages increase from £6.40 to £7.55 per hour. Annual additional cost per employee is £1,701.25, working 37.5 hours a week.

While these increases are positive news for employees, they present another cost challenge for employers. Businesses, especially those operating with narrow profit margins, will need to budget for these wage increases, potentially limiting funds for other areas of growth.

Broader budget changes

Several measures within the autumn budget are likely to have an impact on certain sectors.

• Alcohol tax
  The below changes are set to come into effect in February 2025.
  • Draught
    Tax on draught drinks are set to be cut by 1.7%. For example, if the price of a pint of beer is £4.00, the 1.7% reduction in tax could result in a decrease of about 6-7 pence per pint.
  • Spirits
    Tax on non-draught alcoholic drinks are set to increase by the higher Retail Price Index (RPI) measure of inflation.
• Tobacco
  Taxes on tobacco will increase by 2% above inflation, and by 10% above inflation for hand-rolling tobacco from October 2024.
• Vaping
  A new flat-rate tax of £2.20 per 10ml of vaping liquid will be introduced from October 2026.
• Fuel duty
  The 5p cut in fuel duty on petrol and diesel, initially introduced by the Conservatives, has been extended until April 2026. This provides relief to transport businesses, however, the ongoing uncertainty still affects long-term planning.
• Sugar tax
  The government will review thresholds for the sugar tax on soft drinks in Spring 2025 and are considering extending it to include milk-based beverages.

With rising NIC and minimum wage hikes, industries like retail and hospitality may face increased operational costs with the above tax changes, potentially leading to higher prices and further challenges in customer retention. Whilst the extension on fuel duty provides some relief for transport businesses.

How we can help your company

If you are concerned about the upcoming budget changes, or are already facing financial difficulties and want to discuss potential insolvency solutions, we’re here to help, contact us for free, confidential advice. By acting quickly, you give yourself the best opportunity of navigating an outcome that’s best for your company.

Our licensed insolvency practitioners can carry out formal insolvency proceedings. Our services include payment plans that can help you restructure your debt repayments, and closure and liquidation options for solvent and insolvent companies.

• Company Voluntary Arrangement (CVA): Repay your company debts through a structured plan.
• Administration: Restructure and stabilise your company.
• Creditors Voluntary Liquidation (CVL): Close your insolvent company.
• Pre-pack Liquidation: Close your insolvent company and start again.
• Members Voluntary Liquidation (MVL): Tax efficiently close your solvent company.

How to get in touch with us

1. Speak with our initial advisers
   Contact our team via phone, filling in a form, or via our online chat. If we can help, we will arrange a free consultation with one of our consultants to discuss your situation in more depth.
2. Initial assessment
   During the consultation, we will advise if there is an appropriate route forward with us or whether an alternative solution is better suited for your company.
3. Formally engage with Wilson Field
   If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us. 

Summary

The budget announcement presents both challenges and opportunities. However, the common theme is that potentially higher costs are on the horizon. The increased cost challenges associated with a rise in wages and will mean difficult decisions, overheads such as business rates, utilities and tax obligations to HMRC must still be met. This could present challenges to strategic plans that businesses had, whilst also having the potential to impact cash flow negatively.